The Perimeter Guidance Manual. Chapter 17. Consumer credit debt counselling

Transcription

1 The Perimeter Guidance Manual Chapter Consumer credit debt

2 PERG : Consumer credit debt.7 Examples.7 Q7.1 Please give me some examples of what is and is not debt Please see the following table. All the examples assume that the advice or information relates to debts under a credit agreement or a consumer hire agreement or to a group of debts that include such debts. Examples of what is and is not debt Example Explanation (1) Adviser: I recommend you enter This is debt. This is adinto a debt management plan vice which steers the debtor in the direction of a debt solution which the debtor could enter into as a means of liquidating his debts. (2) Adviser: I recommend you do This is debt. This is adnot enter into a debt management vice which steers the debtor away plan from a particular debt solution which the debtor could have entered into as a means of liquidating his debts. (3) Adviser: I suggest you change This is debt. This is ad- (or do not change) from a debt man- vice that steers the debtor in the diragement plan to a debt arrange- ection of a different debt solution ment scheme from the one that he has already entered into as an alternative means of liquidating his debts. A debt arrangement scheme refers to a debt payment programme under the Scottish debt arrangement scheme (DAS). (4) Adviser: I recommend you do This is not debt as it is not borrow more than you can com- about incurring debts, not liquidatfortably afford ing them. (5) Adviser: I would recommend This is not debt. that you explore the pros and cons of all the different debt solutions It is unregulated generic advice bethat may be available to you cause it does not steer the debtor to any particular course of action in liquidating his debts. (6) Adviser: I think that reaching This is likely to be debt. an informal agreement with your creditors about repaying your debts It does not recommend a precise may not be the best option avail- course of action but, as described in able to you given your cir- the answer to Q5.1 (Broadly cumstances. speaking, what is advice?), this does PERG /2 Release 31 Sep 2018

3 PERG : Consumer credit debt not necessarily matter. The adviser is making a value judgement and giv- ing an opinion and is steering the debtor towards certain courses of ac- tion and away from others. In par- ticular, the adviser has recom- mended that the debtor does not deal with his debts by way of an informal agreement. I will set out the pros and cons of various other debt solutions that may be more appropriate to your circumstances? but ultimately the option you choose will be a matter for you. (7) The adviser gives an explanation If this is given in a balanced and of the way that various types of neutral way it is likely not to be debt solution work. debt as it is just factual information. (8) The adviser gives a comparison Same as the answer to (7). of the features and benefits of one type of debt solution with another and the implications of entering into the two different types of debt solutions. (9) An adviser advises on uncertain The element of uncertainty is likely questions about a debt manage- to mean that the advice has a ment plan. strong element of opinion and hence is likely to be advice, rather than mere information. It is likely to be debt as long as it steers the debtor towards a course of action in liquidating his debts. If the advice is given by a lawyer it is likely to be excluded from debt by the exclusion in article 39K of the RAO (Activities carried on by members of the legal profession etc.) referred to in the answer to Q6.1. (10) A person distributes leaflets or This is not debt as it is illustrations that help debtors to de- advice given to the general public. cide how they will liquidate their See the answer to Q4.1 (Does debt debts cover advice given to the public in general rather than to a particular debtor?) for more about this. (11) A person explains how to fill in It is unlikely that a person would a form for entering into an IVA provide this advice on its own by way of business. If a person provides this help in the course of carrying on some other unregulated activities he will not be debt as it should be seen as providing information not advice. If though he provides this help in the course of a wider debt business it will be included as part of that debt activity. Release 31 Sep PERG /3

4 PERG : Consumer credit debt If the explanation is given by the insolvency practitioner the exclusion in article 72H of the RAO (Insolvency practitioners) is likely to be available (see Q6.1 (What exclusions are available?)). (12) A person uses direct marketing It is not debt as it does and other forms of advertising (for not involve advice to debtors about example, on websites promoted on the liquidation of debts due. search engines) and cold calling, to gather personal information from However, a person providing such redebtors, which is then sold on to ferrals will be debt if providers of debt advice. during the course of communicating with a debtor he makes a recommendation to the debtor as to how he might liquidate his consumer credit debt. (13) A person recommends that a Taken on its own it is not debt coundebtor obtains advice from a par- selling because the adviser is advisticular debt firm, ABC ing the debtor to obtain advice Debt Management. from another adviser. However, if ABC Debt Management only offers one debt solution (e.g. a debt management plan), the referral could constitute a recommendation intended implicitly to steer the debtor in the direction of that particular debt solution and, therefore, could be advice (in which case it would be debt ). Consequently, whether or not debt is involved will depend on the individual circumstances in each case and is likely to involve a consideration of the process as a whole. (14) Adviser: I recommend you This is likely to constitute debt counprioritise the repayment of your selling if, having considered all of a electricity bill over all other debts debtor's outstanding debts, an adviser advises the debtor to prioritise the repayment of a utility bill (e.g. an electricity bill) over his other outstanding debts (including debts arising under credit agreements or consumer hire agreements). This constitutes advising on the liquidation of debts due, since there is an implied recommendation that the debtor should postpone repaying his consumer credit related debts until he has repaid another debt or debts. (15) A person (for example, a This is not debt if all the money adviser) helps a debtor to adviser does is to provide a debtor draw up a budget, e.g. providing a with information about his budget budget planner to see how much and the process is limited to, and disposable income the client has likely to be perceived by the debtor each month or how long the client s as, assisting him to make his own PERG /4 Release 31 Sep 2018

5 PERG : Consumer credit debt money could last over a particular period. choice as to a course of action he might take in liquidating his consumer credit-related debts. It may not be advice at all, in that it just puts into a convenient form information that the consumer has himself supplied. Even if it goes beyond just organising information supplied by the debtor, as long as the adviser gives the information in a balanced and neutral way, the adviser should be seen as providing information rather than advice. The adviser is supplying material that could be used for the purposes of deciding how to liquidate debts but not advising on liquidating them. (16) An adviser gives budgetary This is debt if the adadvice viser goes beyond the services in example (15) and advises the debtor on how to match income and debts. For example, the adviser may advise the debtor to reduce discretionary spending to a set amount each month to enable him to pay off a certain amount of a large credit card bill each month. It does not matter if the result of the advice is that the debtor should pay off his debts in full, rather than by instalments over a period of time or by entering into some sort of repayment plan, as debt is not limited to advice about being released from paying the debt in full or rescheduling. () Mortgage adviser: I advise you This is unlikely to be debt to consolidate your unsecured con-. sumer credit debts into this regulated mortgage contract Leaving aside the exclusions, this would be debt as the mortgage adviser is proposing that the debtor should consolidate a number of his consumer credit debts into a single (potentially more manageable) debt with a view to the debtor being better able to liquidate all of his debts. However, the exclusion in article 39J of the RAO (Activities carried on in relation to a regulated mortgage contract or a home purchase plan) is likely to apply. So far as applicable to this example, the exclusion works like this: Release 31 Sep PERG /5

6 PERG : Consumer credit debt (a) The advice must relate to a regulated mortgage contract. This condition is satisfied. Example (18) illustrates the issues that would arise if the adviser did not advise on specific regulated mortgage contracts. (b) Giving the advice must be a regulated activity. If the only regulated activity involved in giving the advice is debt adjusting, that is not enough. Another regulated activity must apply too. However, the exclusion can still apply if the advice involves debt adjusting in addition to another regulated activity. This condition is met because the adviser is advising on regulated mortgage contracts. Note: Technically this condition (giving the advice must be a regulated activity) would not be satisfied if the only regulated activity carried on by the adviser is debt adjusting, debt collecting or debt administration. However, this example only mentions debt adjusting as, if any of these three regulated activities apply, it is likely only to be debt adjusting. (c) When the mortgage lender enters into the mortgage it will be carrying on the regulated activity of entering into a regulated mortgage contract. PERG 4.7 explains when entering into a regulated mortgage contract applies. (18) Mortgage adviser: I advise you This is debt. The excluto consolidate your unsecured con- sion in article 39J of the RAO (Activsumer credit debts into a single ities carried on in relation to a reguregulated mortgage contract. How- lated mortgage contract or a home ever, I can t advise you what mort- purchase plan) does not apply. gage contract you should enter into or which mortgage lender you The difference between this exshould use. ample and example () is that the advice in this example does not relate to a particular regulated mortgage contract (or several different regulated mortgage contracts). As explained in more detail in PERG G this means that the adviser is not advising on regulated mortgage contracts. The exclusion in article PERG /6 Release 31 Sep 2018

7 PERG : Consumer credit debt 39J does not apply because the adviser is not carrying on another regulated activity, which means that one of the conditions for article 39J to apply is not met. See example () for an explanation of the conditions that must be satisfied if the article 39J exclusion is to apply. (19) A person operating a peer-to- This is debt as long as peer lending platform advises a the loan agreement is a credit debtor on the liquidation of a debt agreement. due under a consumer credit agreement entered into with a lender or The regulated activity of operating lenders (via the platform). In this ex- an electronic system in relation to ample, the platform operator is car- lending covers agreements that are rying on the regulated activity of op- called article 36H agreements, erating an electronic system in rela- which covers more than just credit tion to lending. agreements. If the consumer credit agreement is an article 36H agreement but not a credit agreement the advice will not be debt. Release 31 Sep PERG /7